A lender's glossy quote shows "Monthly Payment: $2,275." Then closing arrives and the real number is $2,800. Nothing changed — the fine print just never quoted the tax and insurance. PITI is the acronym for what actually leaves your account.
The four parts
| Letter | Component | Who it goes to |
|---|---|---|
| P | Principal | Your loan balance (builds equity) |
| I | Interest | The lender (cost of the loan) |
| T | Taxes | Local government (held in escrow) |
| I | Insurance | Insurer (held in escrow) |
Where escrow sneaks in
Lenders collect annual property taxes and homeowners insurance in monthly installments, hold them in an escrow account, and pay the bills for you. That's arguably a convenience — but it's also why your true monthly cost runs higher than the P&I figure you were pitched.
Add the extras buyers forget
Beyond PITI, a home carries HOA dues (if any) and maintenance. A realistic total for many buyers is PITI plus $0–$500/month of HOA and upkeep. That's the number a budget should be built around — not the broker's headline.
A concrete case: $450,000 home, 20% down at 6.5% gives ~$2,275 principal & interest. Add $3,600/year taxes, $1,200 insurance and $150 monthly HOA, and the true payment is about $2,825/month — nearly 25% higher than advertised.
Budget the truth
Use the HomMetra calculator, open the advanced panel, and drop in your district's tax and insurance figures. The number it returns — full PITI plus HOA — is the one your budget should meet.